The Monday Report – 11 March 2024

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            [1] => ((TCL))
            [2] => ((BXB))
            [3] => ((CSL))
            [4] => ((RHC))
            [5] => ((SVW))
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            [1] => TCL
            [2] => BXB
            [3] => CSL
            [4] => RHC
            [5] => SVW
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This story features TRANSURBAN GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: TCL
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Rarefied Air

Following some dovish rhetoric from the heads of both the Fed and ECB on Thursday night, Wall Street shot up to new highs and on Friday the ASX200 followed suit. The futures had suggested a positive opening and that was the case, but there was an hour of consideration before the index headed higher.

Then momentum kicked in.

Leading the charge, again, were the banks (+2.0%). Virgin Money UK ((VUK)) received a takeover bid from a UK building society and rose 32.9%, but the locals moved further into blue sky as well.

The Aussie ten-year yield was not so excitable, falling -3 points.

Every sector closed in the green bar one – industrials sat it out on dips in Transurban ((TCL)) and Brambles ((BXB)).

Materials also lagged (+0.1%) with lithium and iron ore weaker and gold miners not enjoying the surging US gold price, while the Aussie dollar surges with it.

All other sectors rose 0.8-1.3% in a bit of a “buy everything” trade. Since the intraday bottom on Wednesday, the ASX200 added almost 2% to the close on Friday.

Which is very exciting, but alas, the US jobs number came in 'hotter' than forecast, Wall Street was sold off on Friday night after hitting new highs on Thursday night, and our futures were down -47 on Saturday morning.

Still, a pullback today of that amount would take us to 7800, which aside from being almost 100 points above the initial breakout level into blue sky, will likely become the new support level, for now, just as 7700 had held earlier in the week.

The next big event will be the US February CPI numbers on Tuesday night.

When the Chips are Down

The US added 275,000 jobs in February when 200,000 was forecast. Not a great result for those still basking in dovish-leaning commentary from Jerome Powell last week.

However, the unemployment rate ticked up to 3.9% and wage growth was lighter than had been expected, so on balance the report was not so bad after all.

US bond yields remained unmoved.

What really drove Wall Street lower on Friday night were the chipmakers, and one familiar name in particular.

After ticking up day by day every day since its result release, whether other tech stocks rose or fell, Nvidia fell -5.5% on Friday night having begun the session with yet another move up. It seems that finally, it just became too much.

While the Nvidia story has not changed and the stock still remains “cheap” on its PE ratio as far as analysts are concerned, there has been some anxiety about a stock that just keeps on going up. The higher it goes, the bigger the inevitable fall will be. For stocks cannot go up forever.

Nvidia has every reason to be sold given result releases from peers. Broadcom had reported in Thursday night’s aftermarket and on Friday night it fell -7%. Highs hopes had been held for Broadcom as a quieter AI achiever.

Another chip stock, Marvell Technology, was no superhero in falling -11.4% on its result.

Yet, despite these moves, Nvidia initially rallied. Some unidentified trigger point was then hit.  Having been up 35% in a month, 90% year to date and 325% year on year, a -5.5% pullback for Nvidia is hardly a “get me out now” scenario.

Wall Street would rather Nividia, and other tech high-flyers, had these occasional modest pullbacks just to keep the rampant FOMO traders at bay.

And while the Nasdaq did close down -1.2%, among the Big Techs there was switching rather than overall selling. Apple and Google have been the laggards of late, drifting lower as others drifted higher, but on Friday night Apple rose 1% and Google 0.8%.

No joy for the other not so magnificent member of the original Mag7 nonetheless. Tesla fell -1.9% and is down -29% year to date.

There's a lot of talk about big US tech stocks not replicated in Australia, but the point is it was not so much the jobs report that triggered selling on Wall Street on Friday night, although once the indices turned, selling picked up pace.

One would expect this following new all-time highs.

Commodities

Commodity prices in general perked up a bit last week on solid import/export numbers out of China – well above expectation – but a closer look reveals that crude imports to China actually fell -5.7% over January-February, hence oil price weakness on Friday night.

Speaking of FOMO trades, gold is simply moving higher in leaps and bounds. Friday night saw another step up with US bond yields flat and the US dollar only down -0.1%.

The Aussie is 0.2% higher at US$0.6630.

The SPI Overnight closed down -47 points or -0.6% on Saturday morning.

The Week Ahead

And now over to the big one – US February CPI on Tuesday night. Then the PPI on Thursday night.

Wall Street will also see numbers for retail sales, industrial production and consumer sentiment.

Locally we’ll see the NAB business and Westpac consumer confidence surveys tomorrow.

The ex-dividend season has passed its peak but there are still plenty of companies to go ex this week, including CSL ((CSL)) today, along with Ramsay Health Care ((RHC)) and Seven Group ((SVW)).

The February result season may be over but a mini-season of results from smaller miners began last week and will continue this week.

Note the US went on to summer time on the weekend. As of tomorrow morning, the NYSE will close at 7am Sydney time.

The SPI Overnight will also close at 7am.

The Australian share market over the past thirty days…

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